20 Reasons Why America's Next Bank Holiday Will Be a Nightmare
is on now on the brink of a global credit crisis that could be far
worse than the tumultuous events of 2008. The ongoing sovereign
debt crisis in the southern reaches of the Eurozone indicate that
in the region will continue, and that more bank
closure "holidays" will be declared. Under a bank
holiday, virtually all deposits could be frozen and irredeemable
for days, weeks, or even months. The key question is: Will this
crisis spread to the rest of Europe and then even to the United
States? I urge SurvivalBlog readers particularly those in
Europe to be proactive, to stay "ahead of the power
curve." While the Generally Dumb Public (GDP)
wakes up some morning to hear news of a bank holiday, you will have
long hence prepared yourself.
Lost in the Ether Redeemable Mañana?
don't realize that printed U.S. currency and minted coins amount
to less than $800 billion, worldwide. That is just a small portion
of the aggregate Money Zero Maturity (MZM) money supply that now
exceeds $7 Trillion. So what is in your bank account is just
electronic money, and there is absolutely no way that
even a fraction of depositors could get physical cash to redeem
the digits in their accounts. If there is a bank holiday declared,
there will undoubtedly be severe restrictions on
cash withdrawals when banks re-open. Given the precedent of the
on withdrawals of a few institutions during the Savings
and Loan crisis of the 1980s and 1990s, I predict that withdrawal
restrictions could go on for many months.
Here are 20
Reasons why America's next bank holiday will be a nightmare:
- A bank holiday
will create a virtual blackout of information on not just checking
and saving accounts, but also automated mortgage payments, CDs,
and more. Our presently quite transparent banking system will
suddenly become opaque. Your bank balance will
become invisible. Your handy-dandy online banking web page will
be replaced by a "Service Temporarily Unavailable" notice.
The willingness to accept checks will evaporate in less than a
day. The FUD
factor (Fear, Uncertainty and Doubt) will be overwhelming.
- Most businesses
will no longer honor personal checks, corporate checks, or bank
money orders. Showing a merchant your most recent bank statement
isn't likely to sway him. Again, the FUD factor will rule.
- All checks
in the U.S. are cleared through the automated
clearinghouse (ACH) network. Most of this network is
inside of banking system firewalls. Many Federal,
State, and local tax payments are also handled through ACH. (A
similar network exists for European banks the Pan-European
Automated Clearing House (PE-ACH), under the Single Euro Payments
Area (SEPA) system).
- Credit cards
might not be accepted. The FUD factor will dictate that anything
even peripherally related to the banking system will be suspect.
(Even though the credit card companies have their own credit clearing
mechanisms that are only attached to the banking milieu.)
- Except for
a few grandfathered recipients, Social
Security payments are now made exclusively via bank direct deposit.
monthly pay, housing allowances, and ration payments are now made
exclusively via bank direct deposit, in CONUS. That is true virtually
across the board (Active component, Reserve, and National Guard.)
Ditto for monthly military retirement payments.
- Many State
and Federal employees no longer get physical paychecks. They too,
are trapped in the "direct deposit only" world.
- Many Americans
are now very dependent on bank debit
cards (also known as a bank cards or check cards.) In
fact, many people don't even carry more than a few dollars in
their wallets. If our world suddenly goes "cash only"
most people will suddenly be out of cash.
debit card transactions, and online banking can be shut down in
minutes. This huge vulnerability of banking customers has already
been evidenced by a
few minor glitches.
- Online payment
systems like PayPal will be sharply degraded, because they rely
on their ability to move funds to and from banks. More importantly,
online payments are inextricably tied to credit card processing.
If credit card processing is suspended, then online payments will
be "dead in the water."
- Many regular
monthly payments such as mortgages, insurance premiums, and some
utilities are automatically debited from checking accounts.
These will all come to a screeching halt.
- SWIFT wire
transfers will probably be suspended, freezing a good portion
of global commerce. Similarly, International ACH transactions
(IATs) will also be shut down, since they access the U.S. ACH
- The ability
to process credit card payments will be dubious, at best. Many
merchants will wisely "just say no" to credit cards,
even if their countertop POP terminals are still functioning and
show available credit. And the fact that many credit cards are
now just debit
cards in disguise will only add to the reluctance of merchants
to take any credit cards.
- Point of
purchase (POP) processing of credit and debit cards at gas stations
has become ubiquitous. Nearly everyone now uses the "pay
at the pump" option. Gas and diesel could become "cash
- Most American
families keep less than $300 in cash at home at any given time,
including their kids' piggy banks. For most families, that wouldn't
cover even one month's rent.
distributed as "Food Stamps", the USDA's
Supplemental Nutrition Assistance Program (SNAP), provides benefits
to low income families through Electronic Benefit Transfer (EBT)
card payments. These cards look much like credit cards. And like
checks, EBT payments are all routed through
the ACH network. Again, this is a network that is
inside banking system firewalls. If the banking
system goes into holiday mode, then it may take days or even weeks
to get EBT processing back on line. If the EBT payments stop,
we can expect riots in metropolitan areas in less than a week.
- Gift cards
will be "iffy." There are now two types of gift cards:
"open loop" (or "network") cards and traditional
"closed loop" cards. Open loop cards are issued by banks
or credit card companies and can be redeemed many places. It is
likely that only closed loop cards will be honored by the issuing
stores, because merchants will fear that open loop cards might
have been zeroed out elsewhere. (If they can't confirm the available
balance, the card will be refused.)
- Most Internet
vendors are almost entirely dependent on credit card processing.
If that processing system is disrupted, then mailorder firms will
either have to cease operations, or have them slow to a snail's
pace, and be restricted to only non-bank money orders.
to U.S. Postal Service money orders (commonly called "PMOs")
will only be partially viable solution. This is because
many small town and rural post offices don't keep enough cash
in their tills to be able to hand you $1,000 when you go to cash
a PMO. You may be thinking, "Oh well, I'll just ask them
to write me a blank PMO, in exchange. Nope. A recent
change to postal regulations designed to curtail money laundering
banned money order-for-money order issuance. Bummer. And if you
are considering using "Forever" postage stamps, hold
your horses. Under a hygiene regulation published in the Domestic
Mail Manual (DMM), postal clerks are not allowed to cash out ("buy
back") stamp booklets unless they are still in their
sealed clear plastic master packages. So it might take
decades to use up your Forever stamps, or you will be forced to
liquidate them on the gray market at a slight loss.
- Bank safe
deposit boxes will probably be inaccessible. Plan accordingly.
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